Meta reported strong revenue growth in the second quarter of 2026, but its aggressive AI spending pushed free cash flow down 91% from a year earlier.
Revenue reportedly rose 28% to $60.8 billion, while net income fell 14% to $15.8 billion. Diluted earnings per share came in at $6.18, down 13% year-over-year. Meta shares fell about 5% after the results.
AI Spending Hits Cash Flow
Free cash flow dropped to just $784 million, compared with $8.55 billion in the same quarter last year.
Meta spent $31.08 billion on capital expenditures during the quarter, largely as it continues building infrastructure for AI. The company now expects full-year 2026 capital spending of $130 billion to $145 billion, narrowing its previous $125 billion to $145 billion forecast.
Unlike Microsoft and Alphabet, Meta does not operate a major cloud business that can sell its AI computing capacity to outside customers. Most of its investment instead supports its own apps, models and infrastructure. Microsoft, by comparison, reported 43% growth in Azure revenue during the same earnings period.
Meta is also moving some infrastructure financing outside its own balance sheet. This week, it announced a $14 billion data center venture with BlackRock in El Paso, Texas. BlackRock-managed funds will own 80% of the project, while Meta will hold 20%.
Legal Costs and Layoffs Hit Profit
Meta booked $2.4 billion in charges related to legal proceedings and $1.18 billion in severance costs connected to its May workforce reduction.
Those costs helped push operating margin down to 31% from 43% a year ago. Around 8,000 employees were affected by the May cuts. Meta also warned that youth-related trials scheduled in the US this year could ultimately lead to a material financial loss.
Reality Labs, Meta’s division covering virtual and augmented reality products, recorded another $4.62 billion operating loss during the quarter, compared with $4.53 billion a year earlier.
Despite the rising costs, Meta CEO Mark Zuckerberg said AI is already accelerating the company’s core business. Advertising remained strong, with ad impressions increasing 14% and the average price per ad rising 12% year-over-year.
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